Slowdown gets serious: A grim future for India

Bank credit growth in the first 11 months of 2011-12 dropped to 17 per cent from 21.4 per cent a year earlier, with the most recent months seeing a further slowdown.

Corporate profits actually shrank 5 per cent in the October-December quarter - the increased share of sales taken by raw materials and interest ate into margins.

Unusually, business confidence is still high according to the surveys, and electricity generation has surged 9 per cent in recent months, making one wonder who is consuming all that power if industry is without momentum.

Slowdown gets serious: A grim future for India

Trail-blazers like telecom and software services have lost some of their fizz, while once shining sectors like aviation are in cloudy skies, even as the beginning of a shake-out in the media reflects the slowdown in advertising spends.

The slowdown has also meant that the quality of banking assets has deteriorated, so banks are under pressure to watch lending norms.

Slowdown gets serious: A grim future for India

When it comes to administrative and legislative action to deal with the slowdown, the factors that have held up investment still exist - like the continuing paralysis on the rules for mining and land acquisition.

Environmental clearances also continue to be stop-go-stop, with Posco's troubled steel project in Odisha the latest to be flashed a red light.

Key reform measures, like the long-delayed introduction of a goods and services tax, remain in limbo.

Slowdown gets serious: A grim future for India

And for all the evidence that the surveys provide - of high levels of business confidence - the truth is that businessmen are discouraged, and getting disenchanted with the waywardness of the Indian operating environment.

Last month's Budget has not helped. It is hard to deny that there is some flight of capital taking place; some businessmen now talk quite openly about business life being much easier in other geographies.

If domestic capital goes on strike, you can be sure that international investors will follow suit.

Slowdown gets serious: A grim future for India

The state of the world adds to the problem. Europe seems ready to plunge into crisis mode again.

Some US numbers look shaky, and China is slowing down too, finding reflection in lower commodity prices this year - which should have given India some relief on the price front, except that it doesn't show.

Slowdown gets serious: A grim future for India

Toss in the possibility of no stable government being possible after the next Lok Sabha elections, due in two years, and it begins to look like a perfect storm building up.

This is the time to demonstrate leadership, but the government gives every impression of being tired, dispirited and bereft of both ideas and energy - except for some bad ideas that expand the scope for arbitrary actions.